Proposed hospital merger violates state laws, complaint says

In order to adapt to a changing healthcare industry, two Pee Dee area hospitals are seeking to partner together. Loris Healthcare System and McLeod Health announced in April they are looking into a possible merger as a way to cut costs and provide better care.

However, both organizations face a serious problem. Such a move would be illegal under state law.

Loris Healthcare is considered a public body. It was created by the state legislature in 1951 and is a “hospital public service district,” meaning it has the power to tax and the ability to raise bonds. Its Board of Commissioners is also appointed by the governor of South Carolina. As a result, state law explicitly states any partnership with a private organization (such as McLeod) must be “approved by a favorable referendum vote of a majority of the qualified electors of the district voting in the referendum.” In other words, voters in the area must approve the merger.

South Carolina legislators are pushing to change the law, saying Loris Healthcare risks shutting down if it does not have the ability to partner with another hospital. Rep. Tracy Edge (R-Horry) is leading the effort, saying Loris’s future looks bleak without the change.

Without legislation, their hands are tied and they can’t do anything. Without the ability to do something to better their position, the hospital will eventually have to close

If a bill sponsored by Edge passes, the merger would only require the approval of the hospital’s board, instead of a full referendum. The legislation has already cleared the House and is currently working its way through Senate committees.

That action has drawn concern from other hospitals in the area. David Summer is a Columbia attorney who has filed a formal complaint on behalf of those groups, accusing Loris of violating open-government laws. Summer said the hospital is negotiating in secret with public property.

There are a number of folks out there that would be interested in bidding at a public procurement. That’s the whole purpose of a public procurement, to get the best price available for public assets.

His list of clients includes Community Health Systems– a Tennessee-based organization with hospitals in Florence and Marion– as well as Healthcare Corporation of American (HCA), which owns Grand Strand Regional Medical Center in Myrtle Beach. Those groups say Loris should have first sent out a request for proposals (RFPs), which is required of most governmental organizations.

The complaint says Loris Healthcare responded to a Freedom of Information request by simply turning over its original press release and subsequent letters it sent to legislators. Summer said the organization has since released more documents, but he says none offer specifics about any deal with McLeod.

Spokespersons with both McLeod and Loris said they were unavailable for comment.

Edge said he does not think Loris Healthcare realized it was breaking the law by keeping details of its partnership secret.

I don’t think anybody has intentionally tried to hide anything, but this is something new to the hospital and its governing board. If they violated any open-government laws, I’m sure it was unintentional.

Another Grand Strand legislator, Rep. Alan Clemmons (R-Horry), attached an amendment to the bill that would require Loris Healthcare to publicize any final agreement it reaches with McLeod at least four weeks before it can be approved by the board.

Health officials warn this could be only the beginning for alliances between public and private healthcare providers. There are five other hospital public service districts in South Carolina, including Self Regional in Greenwood and Oconee Medical Center in Seneca.

Smaller hospitals say they will take a heavy financial hit from Medicaid provider rate cuts. At the same time, changes under the federal health care reform law offer incentives for large hospital systems. Many experts say this will likely result in more mergers between individual hospitals and bigger, national organizations.

Marion Regional Medical Center in Marion County is an example. The hospital was acquired last year by the Carolinas Hospital System, itself owned by Community Health Systems out of Tennessee. Marion CEO Don Lloyd said such moves are now becoming the norm.

There is very significant merger and acquisition going on in health care right now… Large and small, if they’re not developing partnerships, it’s going to be very difficult to survive.

Todd Atwater, a Lexington legislator who also acts as CEO of the South Carolina Medical Association, agrees, “You’re going to see a lot more strange things in the future.”

Loris Healthcare has a 105-bed hospital in the town of Loris and an emergency care center in Little River called Seacoast. The group is currently expanding Seacoast into a full hospital.